Car Lease Calculator
A lease payment is depreciation plus a finance charge wearing a disguise called the money factor. This calculator undresses it — and translates the money factor into a familiar APR.
The lease payment, translated
A lease charges you for two things: the value the car loses while you have it (depreciation) and the cost of the money tied up in it (the finance charge). Dealers quote the second as a 'money factor' — a small decimal engineered to look like nothing. Multiplied by 2,400 it becomes an APR, and suddenly it looks like something.
Monthly = (net cap cost − residual) ÷ months + (net cap cost + residual) × money factor
Example: a $40,000 car, $3,000 down, 55% residual ($22,000), money factor 0.0025, 36 months: depreciation $416.67, finance charge $147.50 — payment $564.17 before tax. The money factor translates to an APR of 6.0%, the number the lease sheet avoids printing.
What the formula cannot see
Mileage limits, excess-wear charges, acquisition and disposition fees, and the value of simply handing back a car whose market fell — leases concentrate risk at the return desk. The total-cost line here counts the contractual payments and your down payment; the per-mile and per-dent economy is yours to estimate from how you actually drive.
How this is calculated
Residual = price × residual percentage. Net cap cost = price − down payment. Monthly depreciation = (net cap − residual) ÷ term; monthly finance charge = (net cap + residual) × money factor (the standard lease formula — the sum, not the difference, because you are financing the average of what you owe across the term). Sales tax, where entered, applies to the monthly payment, the common US treatment.
Frequently asked questions
Why multiply the money factor by 2,400?
Money factor is an artifact of lease arithmetic: it approximates the interest rate divided by 2,400. The conversion (× 2,400 = APR) lets you compare a lease's financing cost with a loan's APR directly.
Is a higher residual good or bad?
For the payment, good: a higher residual means less depreciation to pay for. But the residual also sets the buyout price if you want to keep the car — a high residual makes buying it out at lease-end expensive relative to market.
Can I negotiate a lease?
The capitalized cost (car price) and sometimes the money factor's markup are negotiable; the residual is set by the lessor's bank and is not. Most bad leases are just bad car prices in costume.
Lease or buy, in one line?
Leasing rents the steepest depreciation years forever; buying owns through the cheap years. Low-mileage drivers who value new cars lease rationally; most others pay for the privilege.
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